Slack demand hits Japan's exports for third month

Central bank ends minimum return on bond purchases in move to stimulate economy

PUBLISHED : Friday, 21 September, 2012, 12:00am
UPDATED : Friday, 21 September, 2012, 2:46am

Japan's exports fell for a third month in the year to August while manufacturing sentiment hit its lowest since February - more evidence that slackening global demand is taking its toll on the export-reliant economy.

Exports fell 5.8 per cent last month from a year earlier, against a 7.3 per cent drop expected by economists, after posting the sharpest fall in six months in July, government data showed.

The export outlook is not helped by the fact that Japanese carmakers, led by Nissan Motor, have lost an estimated US$250 million in revenue because of anti-Japan protests in China this week and now face the risk that sales will sputter in the world's largest car market.

Meanwhile, the Bank of Japan added to its tool kit by abandoning a minimum return on bonds it buys, a step that may ensure it meets targets for adding stimulus to the economy even as a goal of ending deflation remains out of reach.

The central bank scrapped the requirement for regular purchases of government debt, currently set at 1.8 trillion yen (HK$176.8 billion) a month, and for notes that it accumulates under a 55 trillion yen asset- purchase fund.

Policymakers on Wednesday also expanded the asset programme by 10 trillion yen.

The demand for government debt has sometimes left the central bank unable to complete planned bond purchases in recent months.

"The Bank of Japan really wanted to smooth the way for bond purchases, to make sure that asset purchases can be completed," said Bank of America Merrill Lynch. "It also opened the door for negative rates."